redefining the non-core - pwc · lending and npl coverage subdued lending growth although the...

Redefiningthe non-core

www.pwc.at

European Portfolio Advisory Group

Edition October 2017

PwC Europe’s distressed debt market overview

www.pwc.com

PwC2

Turkish distressed debt market review

Foreword

Dear reader,

It is with great pleasure that we invite you to discover the 6th edition of our annualreport dedicated to the distressed debt market.

This year we’re covering new important markets from both Western Europe(Germany, The Netherlands and Belgium) and the Central-Eastern part of thecontinent (Poland, Russia, Ukraine).

Under the theme “Innovation as growth engine”, we’re highlighting the major forcesand trends driving the non-core space while also stepping into a country leveldistressed debt deals environment and major market transactions.

With 2017 coming soon to an end, we look back to yet another active year indistressed debt across the region, including continued deleveraging from banks on abackground of macroeconomic upturn combined with increasing investor appetite.

Marketwise, on the Western Europe side, Germany – although Europe’s largesteconomy – has experienced a limited distressed debt deal flow, given its growthmomentum. The Netherlands have seen a relatively slow year following 2016’sPropertize deal, while Belgium is steadily spawning its market wings. In CEE, lastyear’s trend has consolidated, with South-East Europe continuing to lead thetransactions volume, while CIS (Russia, Ukraine) and Turkey remain largelyuntapped markets that provide material opportunities and observe increasinginternational investors’ interest.

Looking ahead, we expect the deal flow to continue given the regulatory changes(IFRS 9, ECB’s NPL guideline) and availability of cheap funding, albeit deals will tendto become more compact in size and diverse in their underlying assets, pushingprincipals to look for more efficient sale processes with the help of technology.

I hope you’ll find this update informative and insightful in your assessment of theregion’s current and future potential. In the meantime, enjoy reading and we lookforward to discussing more in our next meeting.

With best regards,Bernhard

PwC

Bernhard EngelPartner, Leader FS DealsPwC [email protected]

PwC

Contents

1. Macroeconomic environment 4

2. European distressed debt markets 8overview

3. Deals landscape 12

4. Established markets focus 16

5. Developed markets focus 21

6. Upcoming markets focus 29

Annex 32

3Turkish distressed debt market review

PwC

PwC4

Macroeconomic environment

01 Moderate economic growth, fuelled by a strong labour market and signs of picking up inflation

Monetary policy still supportive, enabling future new lending

PwC

The Eurozone's’ economy is on a continued track ofmoderate GDP growth despite the omnipresentpolitical uncertainties surrounding US trade policies andBREXIT consequences. However, the solid GDP figures aremainly backed by strong private consumption whichgoes hand in hand with steadily growing employmentfigures. The relatively low EUR exchange rate, as well astrending up world trade bolster European GDP further.

On a long term basis, Eurozone’s growth is not expected tooutperform much further due to the aftermaths’ of lastdecades financial crisis still reflecting on the bankingsector and governments high indebtedness.

With the CIS region leaving recessionary territory, overallCEE is expected to outperform the Eurozone in termsof growth again.

5

Macroeconomic environmentCEE and the Eurozone

Regional breakdown of GDP growth (%yoy, 2016-2022F) CEE breakdown of GDP growth (%yoy, 2016-2022F)

Source: IMF, PwC Analysis

CE countries include:Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Slovakia, Slovenia

SEE countries include:Bosnia and Herzegovina, Bulgaria, Croatia, Macedonia, Moldavia, Romania, Serbia, Turkey

CIS countries include:Belarus, Kazakhstan, Russia, Ukraine

For the purpose of our current analysis, CEE countries include all the countries marked as CE, SEE and CIS.

Eurozone’s GDP follows a lingering moderate growth path supported by labour market and private consumption, outweighing current political uncertainties

Continued CEE GDP growth, with 2017 momentum driven by CIS

Bank lending still low, but with positive outlook due to improved capital position of banks’ balance sheets

-0.5%

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

4.0%

2016 2017 2018 2019 2020 2021 2022

CE CIS SEE

-0.5%

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

4.0%

2016 2017 2018 2019 2020 2021 2022

Eurozone CEE

Europe focus countries include:Austria, Belgium, Germany, Netherlands

2016 % yoy GDP

PwC

0%

5%

10%

15%

20%

25%

GR ES CY IT SK LV FI BE IE SI LT EE LU AT NL MT DE

2016 2017F

-2%

-1%

0%

1%

2%

3%

4%

BE AT MT EE LT FI DE NL LU LV GR IT SI ES IE SK CY

2016 2017F

6

Macroeconomic environmentEurozone

Source: IMF, European Commission, PwC Analysis, European Central Bank, PwC Analysis

Picking up of headline inflation rates

Strong labour market bolstered by job creation through strong domestic demand

Deleveraging of governments’ debt due to favourable macroeconomic conditions

Inflation rate (%, average consumer prices method, 2016-2017F)

The increase in Eurozone's’ headline inflation is mainly attributable to the reverting of energy prices from lowlevels. Core inflation remains still below the ECBs 2% target, although labour market is tightening and wages pickup only gradually. The outlook for inflation on services and non-energy goods is expected to stay at current levels.

Unemployment rate (%, 2016-2017F)

The Eurozone is experiencing a period of continuing employment growth. Since yearly job creation isoutperforming labour force growth, unemployment rate is declining to its lowest level since 2008. However wages donot increase to the same extent, among others hindered by an increase in temporary work contracts.

Gross government debt / GDP (%, 2016-2017F)

The indebtedness of Eurozone’s economies is about to decrease. The prevailing low interest rateenvironment, reduced social transfers for unemployment and higher inflation, all have a positive impact on thegovernments’ balance sheets.

0%

50%

100%

150%

200%

GR IT CY BE ES AT SI IE DE FI NL MT SK LT LV LU EE

2016 2017F

PwC

-5%

0%

5%

10%

15%

20%

EE CZ LT HU LV SI SK PL TR MD RS FYRM BiH HR BG RO KZ UA BY RU

2016 2017F

Inflation rate (%, average consumer prices method, 2016-2017F)

CEE inflation shows a mixed picture across its sub-regions. An increase in inflation can be expected in most CE &SEE economies, boosted by still ultra loose monetary policy and rising energy prices. CIS economies operateon decreasing inflation rates.

7

Macroeconomic environmentCEE

Source: IMF, European Commission, European Central Bank, PwC Analysis

Unemployment rate (%, 2016-2017F)

Strong foreign demand, especially coming from the Eurozone also supports the CEE labour market. Still manyeconomies within SEE deal with exorbitant high unemployment rates impeding new retail lending by banks.

CISCE SEE

Gross government debt / GDP (%, 2016-2017F)

CEE countries currently have moderate to high debt burdens. The indebtedness of CEE economies however shouldprofit from the favourable macroeconomic conditions.

CISCE SEE

CISCE SEE

0%

5%

10%

15%

20%

25%

30%

SK LV SI LT EE PL HU CZ BiH FYRM RS HR TR BG RO MD UA RU KZ BY

2016 2017F

Rising inflation expected within CE & SEE regions, driven by monetary policy

Strong labour market supported by foreign demand from the Eurozone

Moderate to high indebtedness of CEE economy

0%

20%

40%

60%

80%

100%

SI HU PL SK LT CZ LV EE HR RS BiH RO FYRM MD TR BG UA BY KZ RU

2016 2017F

PwC8

European distressed debt markets overview

02 CIS region NPL stock continues to increase, flanked

by improved provisioning

SEE & CE countries continue their accelerated deleveraging path, with large volumes already disposed

Western Europe moderate NPL volume decrease to an overall low ratio

PwC

Decline in NPL volume for analysed WesternEurope countries

Germany, having the largest NPL stock, is deleveraging atan accelerated pace, expected to continue in 2017. WhileBelgium steadily reduces the NPL volume, the Netherlandsare expected to accelerate the deleveraging in 2017.

Contrary, CEE NPL volume continues its increase,albeit slowing down

CEE NPL volume increased ca. 7% yoy in 2016, whereasselected Western European economies exhibit the oppositetrend.

Countries driving volume growth in the CEE regionremain to be Russia (+30%yoy 2016), Turkey (+5%yoy2016) and Ukraine (+2%yoy 2016) .

These increases outweigh the deleveraging tendencies inother CEE economies, where already “mature” NPLmarkets such as Romania (-29% yoy 2016), Croatia (-20% yoy 2016) and Hungary (-31% yoy 2016) haveexperienced a vibrant NPL sale activity in the past yearsthus were able to reduce their NPL stock significantly.

NPL ratio continues to be trailing high with stillroom for deleveraging

Although most of the surveyed markets have reduced theirNPL ratio through 2016, ca. half of them are still above the10% mark, most of them from the SEE region with CIS(Ukraine) leading the pack.

9

Distressed debt market overviewNPL stock and ratio


General notes:

1) Others include BiH, FYRM, MD, EE, BY, RKS

2) Eoy 2016 data for BE & LT not available. 2016 Q3 figures reported.

3) Eoy 2015 data for MD not available. 2015 Q2 figures reported.

Western Europe countries show a moderate NPL stock decrease, on a background of low ratios

Russia, Ukraine and Turkey remain drivers of NPL volume increase in the CEE region

CE and SEE economies continue to deleveraging thus exhibiting declining NPL volumes and ratios


NPL ratio (%, eoy 2016, Δpp yoy 2016)

NPL volume (EURb)

* CEE average is equally weighted based on the following countries: BY, BiH, BG, HR, CZ, EE, HU, KZ, LT, LV, MD, FYRM, PL, RO, RU, SI, SK, TR, UA

3)

2.4

2.0-2.7 -1.4 6.0 -1.9

-3.9 1.1-4.3 -1.2 -4.0

-4.9 -0.9 -0.9 -0.4 -0.2 -0.3 -1.0 -0.3 0.1 -0.7 -0.2-0.1

0 %

5 %

10 %

15 %

20 %

25 %

30 %

35 %

UA MD HR BG BY BiH RO RU HU KZ FYRM SI LT CZ SK DE PL LV BE TR AT NL EE

CEE average


3)

NP

L r

ati

o

Yoy change in NPL ratio

PwC

15%9% 9% 7% 5% 4% 3% 3% 2% 2% 0% 0%

-1% -2% -6% -7% -7%

RU SK HU EE KZ CZ BE RO BiH PL TR NL HR AT BY SI UA

yoy Loans to Customers

yoy NPL Volume

115%

77% 74% 73% 72% 72% 71% 70% 70% 68% 66% 60% 59% 56%

50% 49% 44%

34% 28%

-6%

4%

18%

102%

9% 11% 10% 9%21% 17% 20%

11%16%

30%

45%

17% 20%

39%

5%

FYRM TR BiH UA KZ HU SI PL HR RU MD AT SK RO BG CZ BE BY EE

NPL Coverage Ratio Net NPL / Regulatory Capital

10

Distressed debt market overviewLending and NPL coverage

Subdued lending growth

Although the European banking sector is showing signs ofimproved capital positions under accommodatingmonetary policy, new lending in CEE remains subdued.The increase in average loans to customers is drivenmainly by Russia (+15% yoy).

Many of the CE & SEE economies (e.g. SK, HU, EE, CZ)were able to recognize a slight increase in newlending. Combined with a larger reduction in NPLvolumes, these markets show continue deleveraging.

On the other hand economies like BY and UA had to dealwith a reduction in loans to customers.

From the surveyed markets, granted loans to customersdecreased for Austria slightly (-2% yoy).

However, Netherlands and Belgium are following theirtrend in gently inclining loans to customers volumes. Botheconomies were able to reduce their already low NPLratios even further.

Lending continues to be subdued across the region

Further increase in NPL provisioning levels, especially in CIS

Overall decrease of NPL volume to regulatory capital ratio

NPL Coverage ratio vs Net NPL / Regulatory Capital (%, eoy 2016)

NPL volume yearly growth vs. Loans to Customers yearly growth (%, Δyoy 2016)



The NPL coverage ratio (i.e. loans provisioning to NPLvolume), reached 68% on average within the CEEregion. This marks a further increase compared to theprevious years. CIS region economies like Russia,Ukraine and Kazakhstan improved their coverageratios by more than 5%, signalling a potential for

future transactions. On the other hand, Belarus andEstonia, faced a further decrease in coverage ratios,from already significantly low levels.At the same time almost every economy shows adecrease in Net NPL to Regulatory Capital ratio.

Increasing NPL coverage ratio

PwC

BE

BiH

BG

HR

CZ

RU

KZ

PL

RO

SK

SIUA

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

0% 5% 10% 15% 20% 25% 30% 35% 40%

11

Distressed debt market overviewEvolution of key NPL metrics

Source: IMF, National Bank of Serbia, PwC Analysis

High NPL ratios, sizeable provisioning & material stock provide the right mix for deleveraging via NPL disposals

With SEE & CE countries benefiting from past deals, Russia and Ukraine walk the path towards ripening deal conditions

NPL ratio, coverage ratio and volume (%, EURb, eoy 2016)

NPL ratio

NPL coverage ratio Bubble size represents NPL volume

eoy 2015

eoy 2016

Deleveraging via disposals is expected tocontinue and accelerate

Markets exhibiting pressure to deleverage with NPLratios above average, and coverage ratios high enoughto allow banks to sell without material negative P&L effectoffer the ideal landscape for sizeable NPL deals within aneconomy.

Active NPL markets like Romania, Bulgaria andCroatia, are still exposed to NPL ratios above average, but

are clearly converging towards the CEE average, reflectingpast transactions.

Markets like Russia and Ukraine show increasedprovisioning levels as well as a ramping up NPLratio. They are thus seen as interesting targets for futureNPL deals, especially in terms of volume.

* CEE average is equally weighted based on the following countries: BY, BiH, BG, HR, CZ, EE, HU, KZ, LT, LV, MD, FYRM, PL, RO, RU, SI, SK, TR, UA

CEE

2016*

CEE

2016*

BE

BiH

BG

RUHR

CZ

KZ

HU

MLDPL

ROSK

SIUA

HUSIKZ

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

0% 5% 10% 15% 20% 25% 30% 35% 40%

PwC12

Deals landscape

03 Vibrant deal space driven by a virtuous circle of macro, industry and deal drivers

Non-core category is quickly expanding beyond NPL

NPL deals are slowly moving eastwards

PwC13

Deals landscape: changing the “core” of non-core

Following a slower start, 2017 is set to closestrong, with more than EUR 6b GBV of non-core deals currently ongoing or announcedacross the CEE region. Having been kept busyduring the first half of the year by anticipatingthe upcoming regulatory and accountingchanges, banks have placed a number of non-core deals in the market during the secondhalf of 2017. This intense environment isexpected to continue well beyond 2017, drivenby a number of macro, industry and dealspecific factors.

On the Macro side, key drivers are the ongoingupturn in the economy across the continent, in thelight of low inflation and cheap money. With equityhaving become almost as affordable as debt, there is aconstant pressure on buyers’ side to investand deploy their capital.

Looking at industry specific drivers, regulatorychanges hold the spotlight, with IFRS 9, EBA's NDD(new default definition) and ECB's NPL guidelinemaking it expensive for banks to hold on to non- orsub-performing exposures. Alternatively, upwardpressure on equity return and cost reductionexpectations from shareholders, together with (still)subdued lending also leave banks wanting to drivemore value out of their hard worked clientrelationships (or acquire readily available portfolios).

Lastly, on a deal level, the need for moreefficient M&A processes is increasing, asopportunity costs rise for buyers and sellers alike.Additionally, with the largest NPL deals in the regionnow completed or about to, buyers face morecompact deals, potentially yielding lower benefitsbut still sizeable effort and time investments.

Looking ahead – our top predictions

Resurgence of capital relief (i.e. risktransfer) deals. Securitization, synthetic sales,portfolio insurance – we expect all this to be heardmore and more in the vocabulary of C-suitemembers, as they look for solutions to transferringrisk without (necessarily) loosing clientrelationship and potential for further growth.

Underlying asset diversifications. As NPLstock steadily dries up and with little chance that(at least in the near future) new massive bucketswill form given the various regulatory measures inplace and banks’ recent experience, we expectseller and buyers alike to turn their view to other,more benign asset classes labelled as non-core. Beit, performing debt which doesn't fit currentstrategy or entire units previously in charge ofmanaging real estate, leasing or loans, the non-core space is about to get enlarged and moredifficult to define as NPL only, with sellers andbuyers looking to increase their balance sheets.

NPL deal volume moving East. HavingRussia and Ukraine with sizeable stock,improving provisioning and timid but increasingdeal activity, we expect these markets topotentially become (albeit slowly and pendingimproving political stability) the darlings of thedistressed debt industry, as deal and recoveryconditions improve. Additionally, Turkeyremains one of the most interestingmarkets to follow, given its unique mix ofsizeable NPL volume, relatively low complex assetdeal flow and already existing AMC infrastructure.

Technology to play an increasing role indeal making. Automated data readiness tools,pricing engines and trading platforms will becomepart of every day deal business, replacingrepetitive or data intensive deal tasks, and helpingon key deal issues such as data quality and pricebenchmarking.

Lastly, the need to “be earlier in the deal”will intensify. With availability of “off the shelfassets” coming to an end, buyers and seller willneed to come closer, to generate opportunitiesand help optimize their positions, by planningtheir deals strategically as source of both, reliefand incipient of growth.

With the equilibrium on banks' balance sheets not yet reached, the non-core market remains an attractive investment.

Bogdan PopaSenior Manager,PwC EuropePortfolio Advisory Group Leader Austria

PwC14

CEE distressed debt transactions Market perspective

Distressed debt GBV brought to market yearly (EURb) Distressed debt GBV brought to market by country (%)

More than EUR 20b GBV brought to market in the past 5 years. Following three consecutive years of exponential increase, 2017 market volume is expected to slightly fall behind 2016 levels.

Romania and Croatia make-up ca. 60% of the GBV volume brought to market. Hungary and Slovenia coming in approx. equally in 3rd place. Activity growth observed in Bulgaria and Serbia.

Ca. EUR 20b distressed debt GBV brought to market during the past 5 years: South East Europe countries account for more than half of the traded GBV.

With (most) large deals behind, the distressed debt market is now treading on an average GBV deal volume of ca. EUR 150m, approx.. half from the 2014-2016 average deal size.

Most sell-side volume driven by Austrian banks, with Greek banks following closely.

Buy-side activity driven by regional (CEE based or focused) servicer-investors, working together with established Western Europe funds. However, the latter find it more difficult to compete as…

… distressed debt prices have continued to increase, especially across the SEE markets, positive macro perspectives and relative scarcity of (large) deals, combined with appetite from “new” Western Europe buyers and market entry of large European level servicers.

A few more bundle deals (platform & portfolio) expected: encouraged by recent successful deals, more platform deals are currently being prepared, with debt and REO assets.

Increasing supply and appetite for (sub)performing assets: Poland and Romania leading the way, as international and local banks look to reshape their portfolios.

“3rd wave” of new markets underway: both small (Albania, Bosnia & Herzegovina) and (really) big (Russia and Ukraine), these markets are becoming more sought-after by (mostly regional) investors looking to expand their operations and establish themselves in still untapped territories.

0,4

2,1

6,1

8,0

6,0

2013 2014 2015 2016 2017F

∆ yoy+370%

∆ yoy+191%

∆yoy+31%

Romania42%

Croatia19%

Hungary9%

Slovenia8%

SEE7%

Serbia6%

Russia4%

Bulgaria3%

B&H3%

Source: PwC Analysis

PwC

Turkey Confirmed seller interest, with buyers selectively looking

at opportunities Sizeable NPL stock Concentrated servicing market

15

CEE distressed debt transactions Countries overview

Baltics Confirmed investor appetite & seller

interest Favourable regulatory regime Available servicing capabilities Transactions track record in all asset

classes

Russia and Ukraine Known seller interest Political uncertainty, but improving

regulatory regime Sizeable NPL stocks, initial transactions

observed Limited servicing platforms availability

Romania Confirmed investor appetite & seller

interest Favourable regulatory regime Sizeable NPL stock Available servicing platforms Significant transactions track

record in all asset classes

Poland Confirmed investor appetite & seller interest Ongoing transactions, especially in the retail

unsecured segment Available servicing platforms

Croatia & Slovenia Strong transaction track record, with

declining available NPL stock Available and growing servicing platforms Transactions closed or ongoing in all

asset classes

Serbia Known investor appetite & seller interest Regulatory improvements ongoing Sufficient, but declining NPL stock Limited servicing platforms availability

Czech Republic & Slovakia Confirmed investor appetite & seller interest Available servicing platforms Limited stock for portfolio disposals

Hungary Known investor appetite & seller interest Improved regulatory environment Growing number of servicing platforms Several transactions already on the market,

with disposal to continue and accelerate

Country watch

Poland and Romania as mature markets, with both experienced sellers, diversified buyers and servicing available across all asset classes. Similar is also true for Croatia and Slovenia where few sizeable NPL disposals are expected. However secondary sales are expected to grow, intensified by a consolidation trend among local servicers, as well as potential single-ticket transactions.

Hungary, Serbia and Bulgaria have shown strong NPL activities over the past 18 months, with potential in still untapped asset classes (e.g. retail in Serbia with pending regulatory changes) as well as available stock. Strong investors interest driven by improved market confidence, established track record, fast growing servicing platforms and the improving regulatory environment.

Russia and Ukraine still seen as sizeable future opportunities, with both large NPL stocks and ratios putting pressure on sellers, coupled with a modest deals track record outside retail unsecured. Potential has also been identified in smaller markets such as Albania or Bosnia & Herzegovina, where initial transactions are being observed as well as recent concrete steps towards improvement regulatory environment.

Turkey is in a category of its own, with sizeable NPL volumes expected to further increase, but still modest ratios, prompting sellers to a prudent approach. Locked-in servicing, is shared among local AMCs, mostly focused on retail assets. However, secured assets together with AMCs investment, could provide plentiful growth opportunities, pending further macro and political stability.

Bulgaria Confirmed seller & increased buyer interest Favourable regulatory regime Sufficient NPL stock offering deal pipeline Servicing platforms quickly developing


PwC16

Established markets focus

04 Sizable NPL volume available; regulatory changes expected to trigger increased disposal interest

Strong investors appetite based on strong market trust and economic power of the country

Stable and experienced regulators & sellers

PwC17

Austria2016 NPL%: 2.7% (∆yoy - 0.7pp), vol. EUR 16.9b (∆yoy - 4.9b)

1.5% 1.4%1.3% 1.3%

'16 '17 '18 '19

1.0%

2.1% 1.8% 2.0%

'16 '17 '18 '19

6.1%5.9% 5.9% 5.9%

'16 '17 '18 '19

84% 81% 78% 76%

'16 '17 '18 '19

GDP Inflation rate Unemployment rate Debt-to-GDP

Legal & regulatory environment

No banking license is required for the acquisition of performing and non-performing claims, however banking secrecy is to be considered.

In general there is no (legal) difference in treatment of transfer of performing and non-performing claims. However, in practice, the courts show the tendency to treat non-performing claims as less “in need of protection” than performing.

The sale of non-performing loans is generally VAT exempt. The VAT exemption might not apply if a whole portfolio of contracts is transferred (ECJ 22.10.2009, C-242/08, Swiss Re). Factoring would be subject to an analysis on a case-by-case basis.

If a profit is generated from the disposal of loans, that profit would be taxable at the standard CIT. At the same time, losses may be fully deductible from the CIT base of the seller. Condition is that the parties involved (buyer and seller) are unrelated parties and that no transfer pricing issues arise in this respect.

Servicing

Servicing is developed across all asset classes. Locally present names include Intrum Justitia, Hoist Finance, Converta as well as other players.

Selected transactions 2016

Top 5 banks record ca. EUR 21.6b NPL on their consolidated balance sheet; claims against CEESEE

account for vast majority of this exposure

Austrian Banks’ (incl. country’s bad bank HETA Asset Resolution) have strong transaction track record

with regards to its NPL exposure booked in the CEE region; activity with relation to Austrian

booked exposure still limited

Stable legal and regulatory environment

Banks in Austrian hold about two-thirds of their consolidated foreign claims against CEE / SEE.

On account of the restructuring of UniCredit Bank Austria the aggregate total assets of Austrian banking subsidiaries in CE / SEE went down by almost 40% and their geographical risk profile changed notably.

The largest NPL stock is recorded by Erste Group and Raiffeisen Bank International, the countries‘ market leaders in term of size.

NPL volume & ratio largest banks (eoy 2016, EURm)

Consolidated group reports

0%

5%

10%

15%

20%

25%

30%

35%

40%

0

1.000

2.000

3.000

4.000

5.000

6.000

7.000

Erste Group RBI HETA Bank Austria Sberbank

NPL volume NPL ratio

Project name Seller Asset type GBV EURm Market year Status Buyer PwC role

Glan HETA NPL - Leasing

unsecured

110 2016 Late stage n/a Sell-side advisor

Source: IMF, Annual Reports 2015/2016, PwC Analysis

PwC


No formalities or licenses are required for a valid assignment of receivables under theBelgium law. Some types of receivables may be subject to specific formalities which might includelicensing requirements (e.g.: mortgage receivables, consumer credit receivables and receivables arising outof public procurement contracts). In 2012 Belgian law was changed to facilitate the mobilization ofreceivables in the financial sector, softening the formalities applicable to transferring credit receivables and/ or related security interests.

Even though the current NPL environment seems favourable overall, some features in the framework couldrepresent potential challenges to NPL workout in Belgium.

Indicators such as NPLs and payment arrears of households tend to confirm the relativelyhigh quality of bank assets in Belgium while these have been on the rise since the financial crisis,coinciding with the increases in the private debt ratio.

The transfer of NPL is in general VAT exempt. In case a loan portfolio relates to mortgages, stamp dutiescould be due. Capital losses / gains (as calculated on the net tax value) on NPL transfers are in principle taxdeductible / taxable at the general corporate tax rate. Impairments on NPL can be tax deductible if certainconditions are met (a.o. individualization, proof of loss).

Servicing

Locally present names include Stater, Cedar and Intrum Justitia.

Selected transactions 2016 - 2017

18

As of end 2016, top 3 largest banks in the country held ca. 50% of the NPL stock

Strong investors interest, but limited incentive to sell due to high quality of banks’ assets

and low NPL ratios

Stable legal and regulatory environment; no formalities or license are required for claims

assignment

At eoy 2016, largest NPL stock was held by BNPParibas Fortis (ca. EUR 6.1b) and by KBC Bank(ca. EUR 4.3b).

Highest NPL ratio level was registered byArgenta (ca. 4%), followed by BNP and KBC(both at ca. 3%).

Stable NPL ratio (below ECB recommendedthreshold) with increasing absolute value basedon strong economic activity and increasedlanding.


Belgium2016 NPL: 3.5% (∆yoy – 0.3 pp), vol. EUR 24.8b (∆yoy + 1.0b)

1.2%1.6% 1.5% 1.5%

'16 '17 '18 '19

1.8%2.0%

1.7% 1.7%

'16 '17 '18 '19

8.0%7.8% 7.6% 7.4%

'16 '17 '18 '19

106%104% 103% 102%

'16 '17 '18 '19


0,0%

1,0%

2,0%

3,0%

4,0%

5,0%

-

1.000

2.000

3.000

4.000

5.000

6.000

BNP ParibasFortis

KBC Bank Belfius ING Belgium Argenta



n/a AXA Bank Europe NV Branch 633 2017 Ongoing OTP Bank n/a

n/a Van Lanschot NPL, PL 220 2017 Closed CKV n/a

n/a ABN Amro Bank NV Ptf pensiun fund n/a 2017 Closed Record Bank n/a

n/a Optima NPL, PL 120 2016 Closed Delta Lloyd n/a

n/a Krefima NPL, PL 47 2016 Closed bpost Buy-side advisor

n/a Optima / Arcole NPL - Mortgages 28 2016 Closed CKV n/a


PwC19

Germany


Normally no approval of Central Bank is required for transfer of receivable.

Debtor consent is required for transfer of performing loan receivables, while it is not needed for non-performing exposures.

Loan servicers are not regulated directly by the German banking supervision (BaFin), but they have to comply with the same standards as the outsourcing partner itself.

Debt collection companies may be excluded from any regulation depending on the specifics of their services. Many debt collectors offer services that exceed debt collection, e.g. receivables management, which is regulated.

Servicers, who provide financial services on a commercial basis (e.g. Factoring), need the permission/license from the German banking supervisor (BaFin) as stated in § 32 Abs. 1 KWG (German Banking Act).

The transfer of NPL is in general exempt from VAT.

Servicing

Servicing is developed across all asset classes. Locally present names include Intrum Justitia (who recently merged with Lindorff), LOANCOS, EOS, GFKL and others.


Top 5 banks account for ca. 20% of country's NPL stock; Strong decline in overall NPL volume

observed, driven among other by improved market and economic conditions

Strong investors interest and stock available, however still limited incentive to sell due to low

NPL ratios

Stable legal and regulatory environment as well as available servicing capabilities

At eoy 2016, largest NPL stock was held by Deutsche Bank (ca. EUR 10.8b), followed by Commerzbank (ca. EUR 6.9b) and DZ Bank Group (ca. EUR 5.0b).

Highest NPL ratio level was registered by HypoVereinsbank Group, member of UnicreditGroup, (ca. 4.7%), followed by DZ Bank (ca. 3%).

Improved market and economic conditions were observed to increase the pace of deleveraging for German banks.


2016 NPL%: 4.2% (∆yoy – 0.2 pp), vol. EUR 135.0b (∆yoy - 14.0b)

1.8% 1.6% 1.5% 1.4%

'16 '17 '18 '19

0.4%

2.0% 1.7% 1.9%

'16 '17 '18 '19

4.2% 4.2%4.2% 4.2%

'16 '17 '18 '19

68% 65% 62% 59%

'16 '17 '18 '19


0,00%

0,50%

1,00%

1,50%

2,00%

2,50%

3,00%

3,50%

4,00%

4,50%

5,00%

2.000

4.000

6.000

8.000

10.000

12.000

Deutsche BankGroup (incl.Postbank)

CommerzbankGroup (incl.Eurohypo)

DZ Bank Group HypoVereinsbankGroup (member

of Unicredit)

KfW Group


Project name Country Seller Asset type GBV EURm Market year Status Buyer PwC role

n/a Germany Various DCAs NPL - Retail Up to 100 2017 Ongoing n/a Buy-side

Neptun Germany HSH Nordbank Corporate, RE, shipping 10.000 2017 Ongoing n/a Buy-side

Collection Germany Burda Group NPL - Retail 50 2017 Ongoing n/a Buy-side

Sky Germany n/a NPL - Retail 50 2017 Ongoing n/a Buy-side

Glan Austria/Germany HETA NPL - Leasing unsecured 110 2016 Late stage n/a Sell-side advisor

Air Germany HSH Nordbank CRE 200 2017 Signed Cerberus n/a

Deep Sea Germany Nord LB Shipping 1.500 2017 Closed KKR Buy-side


PwC20

Netherlands

0,0%

0,5%

1,0%

1,5%

2,0%

2,5%

3,0%

3,5%

4,0%

4,5%

-

4.000

8.000

12.000

16.000

20.000

ABNAMRO

ING Bank Rabobank SNS Bank NIBC Bank


2.1% 2.1% 1.8% 1.7%

'16 '17 '18 '19

0.1%

0.9%

1.4% 1.5%

'16 '17 '18 '19

5.9%5.4% 5.3% 5.2%

'16 '17 '18 '19

63% 60% 58% 56%

'16 '17 '18 '19



In one of the past CRE transactions, the treatment of borrowers by the financial buyer led to several lawsuits against the Vendor, however only one of the lawsuits resulted in a successful claim.

Cost and duration of settling insolvency cases is relatively low compared to Europe, whereasrecovery rates are among the highest.

Strict bankruptcy law provisions allow lenders to foreclose a mortgage loan even during bankruptcyproceedings. Nevertheless, voluntary sales are observed to be more common resolution strategies.

Lenders can repossess without court order with the mortgage tails remaining enforceable, howeverpersonal insolvencies are still rare, as there is a cultural adversity to excessive debt and tobankruptcy.

Servicing

Specialty servicing is a relatively small part of the Dutch market in terms of volume, as the share of non-performing loans is limited. The competitive set in specialty servicing is broad and consists mainly oflicensed bailiffs who offer loss mitigation services.

Dutch servicing market shows moderate levels of M&A activity, with two major deals made recently beingLindorff / Intrum Justitia and Arrow / Vesting.

Potential growth in servicing market is mainly driven by higher stake alternative financing parties,such as (foreign) private equity houses.

Known names with local capabilities include Capita, CMIS, Lindorff, Situs and Vesting Finance.


Major Dutch banks are observing organic NPL decline in 2017 on the back of economic

recovery and increased special servicing efforts.

Real estate secured portfolios account for most loan portfolio brought to market; key buyers are

observed to be foreign investor groups.

NPL specialty servicers appear to be seeking expansion into other asset classes as the third

party specialty servicing market tightens.

At eoy 2016, Netherlands’ three largest banks(ING, ABN AMRO, Rabobank) hold >95% of thetotal NPL stock.

NPL volume shows positive correlation with theeconomic cycle, whilst there is a negativecorrelation between the NPL rate and GDPgrowth.

Relatively low NPL ratios based on a stronginsolvency framework.

One sizeable NPL portfolio transaction observedin 2017.


2016 NPL%: 2.5% (∆yoy - 0.2 pp), vol. EUR 43.8b (∆yoy - 2.1b)



Stack ABN AMRO CRE NPL 220 2017 Closed Attestor Capital Buy side M&A

Swan Propertize CRE PL/NPL 5.500 2016 Closed Lone star, JPM, Goldman Sachs Buy side M&A

Hieronymus FMS CRE PL/NPL 580 2016 Closed Goldman Sachs Buy side M&A

Orange Rabobank CRE NPL 350 2016 Aborted n.a Buy side DD

PwC21

Developed markets focus

05 Strong transactions activity across most assets classes

Buyer appetite driven by available stock, transaction track-record and supporting regulators

Declining available stock

PwC


NPL portfolio acquirers are required to register with the National Bank as a financial institution and mayhave to fulfil certain capital and business requirements.

There has been a proposition to introduce a 10-year statute of limitations for unsecured loansto physical persons. The proposition was rejected by the National Assembly in October 2017.

Amendments to the Registered Pledges Act to introduce further protective measures forcreditors, eliminate certain inconsistencies, and make the register electronic. The changes regarding thefunctioning of the Central Register of Special Pledges shall enter into force in September 2018.

Changes in the Commercial Act regarding insolvency proceedings are currently in effect, including theintroduction of a new procedure for among other, early stabilisation of companies as a way ofavoiding insolvency.

NPL transfers are generally not subject to VAT or stamp duty. Corporate income tax may apply.

Servicing

International and regional servicers show increasing appetite for the market, with set-up of secured (bothprivate individuals and corporates) assets servicing capabilities are currently developing.

Locally present names include APS, AVS, B2Holding, Credit Express, Kredit Inkaso, EOS, Frontex, etc.


22

As of end 2016, top 3 largest banks in the country held ca. 60% of the NPL stock

High continuation of market activity expected for 2017 / 2018, following successful 2016

activity; expected further increase in the volume of NPLs put up for sale driven among others by

mergers observed on the market

Improving legal & regulatory conditions, while NPL acquirers still need to be registered as

financial institutions

At eoy 2016, largest NPL stock was held byUniCredit’s Bulbank and by First Investment(ca. EUR 730m each).

Highest NPL ratio level was registered byUnited Bulgarian Bank (ca. 26%), followed byEurobank (ca. 19%).

Observed accelerated deals market activitystemmed from increased investor confidenceas well as AQR conducted in H1 2016.

The merger of United Bulgarian Bank withlocal subsidiary of KBC is expected to lead tosignificant NPL volume being brought to themarket


Bulgaria2016 NPL%: 13.2% (∆yoy – 1.4 pp), vol. EUR 5.0b (∆yoy – 0.4b)

3.4%2.9% 2.7% 2.5%

'16 '17 '18 '19-1.3%

1.0%1.8% 1.9%

'16 '17 '18 '19

7.7%

7.1% 6.9%6.7%

'16 '17 '18 '19

28%

24% 24% 23%

'16 '17 '18 '19


0%

5%

10%

15%

20%

25%

30%

-

200

400

600

800

UnicreditBulbank (cons.)

First InvestmentBank (cons.)

UnitedBulgarian Bank

(cons.)

Eurobank DSK Bank(cons.)

Societe GeneralExpressbank

(cons.)



Metro Eurobank NPL - Corporate 65 2017 Late stage n/a n/a

Taurus 2 Bulgaria UniCredit NPL - Mixed 80 2017 Late stage n/a n/a

n/a BNP Paribas NPL - Retail 46 2016 Closed Kredit Inkaso n/a

Taurus Bulgaria UniCredit NPL - Corporate, CRE 100 2016 Closed B2Holding Sell-side advisor

n/a Eurobank NPL - Retail unsecured 143 2016 Closed EOS n/a

n/a National Bank of Consumer 70 2016 Closed n/a n/a

Source: IMF, Annual Reports 2015/2016, PwC Analysis, National Bank of Bulgaria

3.4% 3.6% 3.2% 2.9%

'16 '17 '18 '19

PwC23

Local subsidiaries of UniCredit, Erste and Intesa held ca. 80% of the system’s NPL stock

at eoy 2016, with Raiffeisen Bank registering highest NPL ratio

High investor appetite and bank activity during the past 2 years, where all major banks

have performed, or are currently in significant NPL deleveraging / disposal processes.

The extraordinary administration of Agrokor Group and the potential spilover effects to Agrokor

reliant suppliers may bring additional NPL volumes to the market. However, no snowball

effect to the overall economy is expected by the Croatian National Bank (CNB)

Zagrebacka Banka (UniCredit), held ca. EUR1.8b of NPL stock at eoy 2016 (following closingof Taurus 1 transaction in 2017, significant dropexpected), followed by Erste and PBZ (Intesa)with ca. EUR 0.7b each.

NPL ratio-wise, highest level was registered bythe Raiffeisen Bank (18%), followed byHrvatska Postanska Banka as well asZagrebacka banka.

CNB is expecting an increase of provisions forCroatian banks’ unsecured exposures toAgrokor Group companies and its selectedsuppliers.Legal & regulatory environment

Currently no special licensing is required for NPL portfolio acquisitions; there are however ongoingdiscussion regarding potential introduction of a servicing license concept.

National Bank non-prohibition confirmation of SPAs is required for signing.

In April 2017, the Act on the Extraordinary Administration Procedure in Companies ofSystemic Importance for the Republic of Croatia was introduced. Agrokor was the first companywhich submitted the request for extraordinary administration, upon which the law is colloquially called“Lex Agrokor”.

Further significant legal & regulatory changes are expected to arise from implementation of IFRS 9and Basel IV.

Bank NPL write-offs become tax exempt only after “sufficient collection measures” have been taken.

Servicing

Servicing is developed across all asset classes, as a result of a strong transaction track record.



Croatia2016 NPL%: 13.6% (∆yoy - 2.7pp), vol. EUR 4.7b (∆yoy – 1.1b)

2.9% 2.9%

2.6%2.5%

'16 '17 '18 '19 -1.1%

1.1% 1.1%1.4%

'16 '17 '18 '19

15.0%13.9% 13.5% 13.2%

'16 '17 '18 '19

84% 83% 82% 80%

'16 '17 '18 '19


0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

20%

-

400

800

1.200

1.600

2.000

Zagrebackabanka (cons.)

Erste & StmkBank (cons.)

Privrednabanka (cons.)

Raiffeisenbank(cons.)

Hrvatskapoštanska

banka (cons.)

Addiko Bank(cons.)



n/a Intesa NPL - CRE 200 2017 Expected n/a n/a

Solaris HETA Platform & NPL portfolio 700 2017 Expected n/a Sell-side advisor

Taurus 2 Croatia UniCredit NPL - Mixed 260 2017 Ongoing n/a n/a

n/a Raiffeisen NPL - Corporate 45 2017 Ongoing n/a n/a

n/a Raiffeisen NPL - Single ticket 85 2017 Ongoing n/a n/a

Atlantis HETA Single ticket 30 2016 Ongoing n/a Sell-side advisor

n/a Raiffeisen NPL - Corporate 100 2017 Signed DDM n/a

Faust HETA Single ticket 100 2016 Signed Gasfin SA Sell-side advisor

Pathfinder HETA CRE 400 2016 Closed Deutsche Bank / EOS Buy-side advisor

Sunrise HPB NPL - Mixed, CRE 320 2016 Closed APS / B2Holding n/a

Taurus Croatia UniCredit NPL - Mixed 770 2016 Closed APS / Attestor Sell-side advisor

Saphire HETA Single ticket 135 2016 Closed KNG Sell-side advisor

Apollo HETA Single ticket 25 2016 Closed B2Holding Sell-side advisor

Skipper HETA NPL - CRE 160 2016 Closed Supernova n/a

Source: IMF, Annual Reports 2015/2016, PwC Analysis, National Bank of Croatia

PwC24

Intesa, KBC, Erste and Raiffeisen local subsidiaries held the most significant NPL stock

at eoy 2016, registering also some of the highest NPL ratio level in the local banking system

Following the lift of the private individuals enforcement moratorium, the NPL disposals market

picked up considerably during 2016 (EUR 0.8b NPL disposal in 2016), with further

intense activity anticipated for 2017 driven by hgh investor appetite and outstanding volume

(Secured) servicing at mature stage, with most large international and regional players looking

to establish or consolidate their local position

Following deal activity and regulatory supportthe Hungarian total NPL stock showed asignificant decline over the past years, with EUR1.6b less yoy 2016. The deleveraging activity isexpected to continue at a similar pace.

CIB (Intesa Group) recorded NPL volume of ca.EUR 600m (on a 21% NPL ratio), followed byRaiffeisen Bank and Erste with ca. EUR 420mand EUR 350m, respectively.

MARK (the local state-owned “bad bank”) wassold to APS in April 2017.


A locally financ institution license is needed to acquire NPLs.

As most foreign currency denominated mortgages have been converted to local currency, the foreclosuremoratorium does not apply anymore, making them more attractive to potential investors.

Minimum enforcement price for residential R/Es was introduced (70% of the market value until March2017, 100% in the first year and 90% in respect of any subsequent enforcement attempt from March 2017).

The Hungarian VAT act does not stipulate conclusively whether NPL transactions are VAT exempt or not.

As of 1 January 2017, the National Bank passed a general decision prescribing the creation of a systematicrisk buffer to credit institutions operating in Hungary and to groups involving a credit institution.

Servicing

Servicing is at a mature stage with local service providers and a growing number of regional players mainlyfocused on retail unsecured, but eager to grow in secured asset classes.

Known names with local capabilities include APS, AVS, Arthur Bergmann, Credit Express, DDM, EOS,Indotek, Intrum Justitia etc., with other large regional names currently in advance stages of setting up localoffices (e.g. B2Holding).



Hungary2016 NPL%: 7.4% (∆yoy - 4.3 pp), vol. EUR 3.5b (∆yoy - 1.6b)

2.0%2.9% 3.0% 2.6%

'16 '17 '18 '19

0.4%

2.5%3.3% 3.0%

'16 '17 '18 '19

4.9%4.4% 4.3% 4.3%

'16 '17 '18 '19

74% 73% 72% 71%

'16 '17 '18 '19



n/a MKB Bank NPL - Retail 200 2017 Expected n/a n/a

Taurus 2 Hungary UniCredit NPL - Retail 50 2017 Ongoing n/a n/a

Rosie Raiffeisen NPL - Retail 300 2017 Ongoing n/a n/a

Taurus Hungary UniCredit NPL - Retail 130 2016 Closed APS Sell-side advisor

Ulysses Erste NPL - Retail mortgage 350 2016 Closed Intrum Justitia Buy-side support

Rita Raiffeisen NPL - Corporate, mixed 300 2016 Closed n/a n/a

n/a Axa Residential n/a 2016 Closed OTP n/a

Source: IMF, Annual Reports 2015/2016, Hungarian National Bank, Hungarian Central Statistical Office, PwC Analysis

0%

5%

10%

15%

20%

25%

-

200

400

600

800

CIB Raiffeisen BankHungary

Erste BankHungary

K&H UniCredit BankHungary

OTP Hungary(uncons.)


PwC25

Poland

Poland recorded the highest NPL level in the CEE region – EUR 11b. Market dominated by top

banks PKO Bank Polski, Bank Pekao, Raiffeisen Polska, Bank Zachodni WBK and mBank accounting

for majority of country’s NPL stock.

Highly active retail NPL market, with limited activity observed in the secured Corporate & SME

segment


No notification (or permits) of the National Bank or other national authorities is required for assignment of NPLs. However the sale of highly contentious FX mortgage loans held in Polish banks to external buyer is potentially to be discussed with Polish Financial Supervision Authority.

Retail loans are subject to a double legal framework - Consumer Credit Act with some protection of the borrower and Banking Act; in addition sale of mortgage loans are subject to the upcoming law transposing Mortgage Credit Directive (e.g. mechanism of forbearance).

No license is required for the acquisition of NPLs, while servicing the NPL loans requires permission by Polish FSA in some cases.

There is a waiver of bank secrecy on NPL sales.

VAT treatment of the transfer of NPLs is a complex issue in Poland and subject to different interpretations of tax authorities and administrative courts. It should be analysed on a case-by-case basis.

Servicing

Main servicers on the polish market include Kruk, Best, EOS Group, CreditExpress, B2Holding, APS Holding, GetBack, Kredyt Inkaso as well as PRA Group.



2016 NPL%: 4.1% (∆yoy - 0.3pp), vol. EUR 11.4b (∆yoy - 0.6b)

PKO Bank Polski, largest bank in the country, held the largest NPL stock as of end 2016 amounting to ca. EUR 2.8b, followed by Bank Pekao, (ca. EUR 1.8b) and Bank Zachodni WBK (ca. EUR 1.6b).

The highest NPL ratio among selected banks was recorded by Bank Pekao, reporting a ratio of 9.2%, followed by Raiffeisen Bank with a ratio of ca. 8.0%. Remaining top banks exhibited a ratio of 6.0% on average.

Recent transactions, amounting to EUR 3.7b since 2015, show increasing activity and interest in the polish NPL market.


n/a n/a PL - Retail Mortgage >2000 2018 Expected n/a Financial advisor

n/a n/a NPL - Retail >250 2018 Expected n/a n/a

n/a n/a NPL - Retail >250 2017 Expected n/a n/a

n/a n/a PL - Retail Mortgage 100 2017 Ongoing n/a Lead sell-side

n/a n/a NPL - Retail >200 2017 Ongoing n/a n/a

n/a Idea Leasing PL - Leasing (securitisation) 350 2017 Ongoing n/a n/a

n/a Getin Noble Bank PL - Auto-loans (securitisation) 166 2017 Closed n/a n/a

n/a Santander PL - Retail (securitisation) 290 2016 Closed n/a n/a

Source: IMF, Annual Reports 2015/2016, National Bank of Poland, PwC Analysis

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

10%

-

400

800

1.200

1.600

2.000

2.400

2.800

PKO Bank Polski Bank Pekao Bank ZachodniWBK

mBank Raiffeisen Bank


2.6%3.8% 3.3% 3.0%

'16 '17 '18 '19

-0.6%

1.9% 2.3% 2.5%

'16 '17 '18 '19

6.2%4.8% 4.0% 3.9%

'16 '17 '18 '19

54% 54% 54% 54%

'16 '17 '18 '19


PwC26

Romania2016 NPL%: 9.6% (∆yoy - 3.9pp), vol. EUR 5.6b (∆yoy - 2.3b)

Out of the ca. 37 credit institutions on the market, the top 3 local franchises by NPL

volume (Erste, SocGen and UniCredit) held ca. 40% of the total NPL stock at eoy 2016

Most active NPL market in the region, with transactions topping EUR 3b GBV in the last 18

months; servicing developed across all asset categories, with active competition among players

Active and supportive regulatory environment

BCR (Erste Group) recorded an NPL stock ofca. EUR 0.9b at eoy 2016 (significant dropcompared to eoy 2015) closely followed byBRD, the local SocGen subsidiary.

Overall NPL ratio at 9.6% beginning of theyear, with highest NPL ratio stemmed fromthe UniCredit bank, at ca. 13.0%.

Ongoing M&A activity over the last 18months(latest being Bancpost).

Most large local players went through NPLdisposal processes, with further salesexpected.


No license is required for the acquisition of receivables with the exception of certain mortgage loans.However, starting January 2017 the debt collectors need to be registered at the National Authority forConsumer Protection and implicitly follow a given code of conduct.

Due to the high number of transactions, legal documentation and proceedings are largelystandardised, providing a rather transparent and reliable environment for investors.

In 2014 a new insolvency law came into effect assisting creditors in enhancing their recovery rates.

In 2016 Law no. 77/2016 on discharge of mortgage backed debts through transfer of title over immovableproperty applicable to the retail sector has been implemented (“deed in lieu” legislation).

Starting 2018, tax deductibility of losses from sale of receivables will be limited to 30% (from current100%), with potential impact on the economic viability of such disposals for sellers. NPL transfers aregenerally not subject to VAT or stamp duty, but corporate income taxes may apply.

Servicing

Well-established servicing market, with several players having large-scale servicing capabilities for allasset classes.

Locally known present names include subsidiaries of all major regional players such as APS, B2Holding,EOS, Getback, Kredyt Inkaso, Kruk and others.



4.8% 4.2% 3.4% 3.3%

'16 '17 '18 '19-1.6%

1.3%3.2% 2.9%

'16 '17 '18 '19

6.0%5.4% 5.2%

5.8%

'16 '17 '18 '19

39% 41% 42% 43%

'16 '17 '18 '19



Castrum - Retail Banca Transilvania NPL - Retail unsecured 110 2017 Late stage EOS n/a

Fain Raiffeisen NPL - Mixed 260 2017 Ongoing n/a Sell-side advisor

Mars Alpha Bank NPL - n/a 400 2017 Ongoing n/a Sell-side advisor

Blue Lake Erste NPL - Retail mortgage 410 2016 Closed B2Holding / EOS Sell-side advisor

n/a Piraeus NPL - Mixed 200 2016 Closed Kruk n/a

n/a CEC Bank NPL - Mixed 70 2016 Closed Kruk n/a

Iris Societe Generali NPL - Corporate secured 280 2016 Closed Kruk n/a

ROSE Top Factoring Platform & NPL portfolio n/a 2016 Closed Intrum Justitia Sell-side advisor

n/a Bancpost (Eurobank) Consumer 597 2016 Closed Kruk / IFC n/a

0%

2%

4%

6%

8%

10%

12%

14%

-

100

200

300

400

500

600

700

800

900

1.000

BCR Group BRD Group UniCreditGroup

BancaTransilvania

Group

Raiffeisen BankGroup

CEC


Source: IMF, Annual Reports 2015/2016, National Bank of Romania, PwC Analysis

PwC27

Serbia2016 NPL%: 17.2% (∆yoy + 3.9pp), vol. EUR 2.8b (∆yoy - 0.7b)

NPL stock dispersed across the system, with top banks by volume making up ca. 40% at eoy 2016

Positive regulatory perspective – National Bank has commenced with the implementation of

introduced “Action plan for the Implementation of the NPL Resolution Strategy”.

Strong disposal wave observed over the past 18 months, triggered by growing investor

appetite and increasing NPL ratios.


A banking licence is (still) required for the acquisition of retail loan portfolios.

National Bank approval of the transaction is not required, however, the notarization of the transfer may beneeded if a claim is secured by a mortgage.

Law on the Real Estate Appraisers, regulating profession of real estate appraisers came into force inJanuary 2017. Additionally, the National Bank has published an official interpretation of the application ofbanking secrecy rules with the aim to facilitate comprehensive due diligence for NPL sales.

The new Law on Consensual Financial Restructuring is applied from February 2016, intending toimprove legal framework for voluntary debt restructuring.

NPL buyer (still) cannot unconditionally takeover an ongoing dispute without the consent fromthe counterparty.

NPL transfers are generally VAT exempt, providing that not only the risks and rewards of a receivable aretransferred, but also the actual title to the receivable.

Servicing

Fast development of servicing capabilities across all asset classes on a wave of conducted disposals

Known names with local capabilities include APS, AVS, B2Holding, Credit Express, EOS, etc.


Komercijalna Banka and Banka Intesa recordedlargest NPL stock totalling ca. EUR 300m,followed by Societe Generale (ca. EUR 260m)and UniCredit (ca. EUR 200m).

A number of M&A activities observed in themarket, expected (e.g. Allpha Bank) to lead toconsolidation of the banking sector in thecountry.

Relatively high NPL ratios and fullimplementation of Basel II standards expectedto further incentivise banks to dispose of NPLportfolios.


2.8% 3.0% 3.5% 3.5%

'16 '17 '18 '19

1.1%

2.6% 3.0% 3.0%

'16 '17 '18 '19

15.9% 16.0% 15.6% 15.3%

'16 '17 '18 '19

74% 73%70%

67%

'16 '17 '18 '19


(5%)

5%

15%

25%

-

100

200

300

400

Komercijalnabanka (uncons.)

Banka Intesa Societe General(uncons.)

Unicredit Raiffeisen

NPL volume NPL charts


Pineta NLB NPL- Corporate, SME tbc 2017 Expected n/a Sell-side advisor

n/a Sberbank NPL - Corporate 45 2017 Ongoing n/a n/a

Onyx HETA NPL & Platform, Mixed 350 2016 Signed APS / Apollo / Balbec Sell-side advisor

n/a Intesa NPL - Corporate 150 2016 Closed Apartners n/a

Victor Piraeus NPL - Mixed 45 2016 Closed B2Holding Sell-side advisor

n/a Raiffeisen NPL - Single ticket 50 2016 Closed n/a n/a

Grey Erste NPL - Corporate 21 2015 Closed APS n/a

n/a Intesa NPL - CRE 35 2015 Closed n/a n/a

Source: IMF, Annual Reports 2015/2016, National Bank of Serbia, PwC Analysis

PwC28

Slovenia2016 NPL%: 5.1% (∆yoy - 4.9pp), vol. EUR 1.5b (∆yoy - 1.5b)

At end 2016, largest NPL volume held by state owned NLB, followed by Abanka and NKBM

Active market during 2016 and 2017; H2 2017 onwards limited new NPL portfolios are expected to be

brought to the market, while single ticket market is expected to continue to be active.

Supportive regulatory environment, with no particular hurdles for NPL trades


Under current regulation, no banking licence is required for the acquisition of NPL portfolios.However, a consumer lending license may still be required with regard to retail receivables, unless theseare acquired from a licensed bank.

Personal bankruptcy regulation exists for private individuals.

NPL transfers are generally not subject to VAT or stamp duty, but corporate income taxes may apply.

Servicing

Developed servicing capacities exist across all asset classes.

Known names with local capabilities include B2Holding, AK Servicing, Credit Express, EOS, Prohit, etc.


NLB held the largest local NPL stock as of end2016 amounting to EUR ca. 700m, followed byAbanka and NKBM, each with less than EUR350m.

Active M&A market observed, with ongoingsales of shares in Gorenjska banka and DeželnaBanka Slovenije .

Thanks to strong deleveraging activities andpositive macroeconomic environment, the totalcountry’s NPL stock declined by ca. EUR 1.4byoy 2016, while further substantial reduction isexpected for 2017, arising from transactionsclosed during the year.


0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

-

200

400

600

800

Nova LjubljanskaBanka d.d.(uncons.)

Abanka Vipa d.d.(cons.)

NKBM UniCredit BankaSlovenija d.d.

(uncons.)

SKB Banka d.d.Ljubljana(uncons.)




Amber Abanka NPL - Corporate 246 2017 Ongoing n/a Sell-side advisor

Pohorje DUTB NPL - CRE 10 2016 Ongoing n/a Sell-side advisor

Taurus Slovenia UniCredit NPL - Mixed 140 2016 Closed B2Holding Sell-side advisor

Alpha Raiffeisen NPL - Corporate, CRE 55 2015 Closed B2Holding Sell-side advisor

Istrabenz Bawag NPL - Corporate, CRE 47 2015 Closed York n/a

Pine NLB NPL - Mixed 500 2015 Closed Apartners / Pineriver / DDM Sell-side advisor

n/a DUTB NPL - Corporate, CRE 670 2015 Closed BAML n/a

2,5% 2,5% 2,0% 2,0%

'16 '17 '18 '19

7,9% 7,0% 6,6% 6,2%

'16 '17 '18 '19

79%78% 77% 77%

'16 '17 '18 '19


-0.1%

1.5%2.0% 2.0%

'16 '17 '18 '19

PwC29

Upcoming markets focus

06 Limited transaction track-record

Buyer appetite driven by anticipated first-mover advantage, existing stock & expected volume increase

Uncertain, but improving legal and regulatory environment

PwC


n/a Akbank NPL - n/a 180 2017 Closed Hayat / Final / Efes n/a

n/a Yapı Kredi NPL - Retail & Corporate 140 2017 Closed Güven n/a

n/a Yapı Kredi NPL - n/a 139 2017 Closed Güven / Hayat /Sümer n/a

n/a Finansbank NPL - Retail 218 2016 Closed Güven / Atlas / Destek n/a

n/a Akbank NPL - n/a 122 2016 Closed Güven n/a

30

Turkey

Market dominated by top 10 banks with EUR 12.9b NPLs (ca. 82% of total NPL stock)

NPL purchase allowed only to licensed AMCs regulated and audited by the BRSA (Banking

Regulation and Supervision Agency)

Highly active unsecured NPL market with standardised disposal processes; secured corporate

portfolios are on the agenda while state banks’ portfolios are expected to start being traded soon


NPL acquiring allowed only to licensed AMCs. Newly established AMCs are exempt from paying taxes for the first 5 years.

Previous regulation did not allow state-owned banks to sell their NPL portfolios. With the new communique published by the regulator- BRSA in August 2017, portfolios of state-owned banks such as Vakıfbank, Halkbank and Ziraat, are expected to come to market soon.

Credit Guarantee Fund, a government initiative, to support lending to SMEs boosted the loan growth in banking in 1H 2017. Total lending through Credit Guarentee Fund as of now has amounted to ca. EUR 55b. Furthermore, in 2016, BRSA lowered the provision on retail loans and simultaneously increased the limit for consumer loans and credit cards to encourage household lending.

Regulatory measures by the government and the regular to support the economy, leading to rapid loan growth could eventually reflect into a deterioration of the asset quality for the upcoming period.

Servicing

14 active local AMCs, licensed by BRSA, act both as investors and servicers. Two largest AMCs, Güven and Hayat Varlık, dominate the market with ca. 60% market share.

Highly experienced unsecured retail servicing. Secured corporate portfolio sales are on the agenda.



2016 NPL%: 3.1% (∆yoy + 0.1pp), vol. EUR 15.7b (∆yoy + 0.7b)

In banking sector, eoy 2016 NPL stock is equal to ca. EUR 15.7b, almost equally distributed across the Corporate, SME and retail segments. YKB has the largest NPL stock with EUR2.3b on its books.

Relatively low NPL ratio of 3.1%, due to NPL sales and eased regulations on restructuring.

During 2016, 33 NPL transactions with a total GBV of EUR 1.7b were recorded, while the market expects a total NPL sales volume of ca. EUR 2b for year 2017.

Finansbank has a distinctive NPL ratio of 5.8% despite substantial NPL sales (equal to more than EUR 300m face value during 2016).

0,0%

1,0%

2,0%

3,0%

4,0%

5,0%

6,0%

7,0%

-

500

1.000

1.500

2.000

2.500

YKB Vakıfbank Garanti Halkbank İşbank Akbank Ziraat Finansbank

NPL (in EURm) NPL%

2.9% 2.5%3.3% 3.4%

'16 '17 '18 '19

7.8%10.1% 9.1% 8.5%

'16 '17 '18 '19

10.8%

11.5%11.0% 10.8%

'16 '17 '18 '19

29%

30% 30%

29%

'16 '17 '18 '19


Source: IMF, Annual Reports 2015/2016, Banking Regulator and Supervisory Agency (BRSA), PwC Analysis

PwC31

Two separate entities, the Federation of BiH (“FBiH”) and the Republika Srpska(“RS”), each have essentially different legal regimes applicable1); nevertheless, certain matters are regulated by State laws applicable in all parts of the country.

There is no formal legal Act regulating NPL sale, however, agencies supervising the financial institutions in the country have the right to intervene in the case of such transactions by the banks. These agencies are currently working on by-laws that should regulate sale of NPLs in BiH.

In general, NPL transactions are subject to VAT. However, there is no full clarity with regards to calculation methods for tax basis.

Bosnia & Herzegovina2016 NPL%: 11.8% (∆yoy -1.9 pp), vol. EUR 1.0b (∆yoy - 0.1b)

As at end 2016, total NPL volume held by country’s banks amounted to ca. EUR 1.0b

Pioneer transactions observed on the market, expected to be followed by additional smaller scale

disposals

First servicing platforms are currently being established in the market and regulators have

started creating legal framework for NPL resolution, expected to increase market security


As a part of the action plan for addressing NPL issues a new Bankruptcy Law was introduced end 2016 which simplifies the existing framework, allows for expedited approval of reorganisation plans and protects economic and governance rights of secured and unsecured creditors.

Additionally Private Bailiffs Law and Law on Judicial Bailiff Service was amended and aims to increase the efficiency of foreclosure procedures and debt collection as well improve the structure of fees for bailiff services.

Many additional improvement were observed supporting NPL resolution- change with regards to regulatory write-off regulations, credit register update, introduction of guidelines on out-of-court debt restructuring and other.

Albania2016 NPL: 18.3% (∆yoy -1.7pp), vol. EUR 0.8b (∆yoy - 0.02b)

As at end 2016, total NPL volume held by country’s banks amounted to ca. EUR 0.8b

Initial transactions observed on the market, supported among other by action plan introduced by the Albanian authorities to address NPL issues

Limited number of servicing platforms

1) Additionally there is a special autonomous district under direct sovereignty of the state, the Brcko District



n/a Piraeus NPL - n/a 50 2017 Ongoing n/a n/a

n/a Intesa NPL - n/a n/a 2017 Ongoing n/a n/a


Bolero HETA NPL - n/a 440 2017 Ongoing n/a n/a

Drava HETA NPL - Coprorate, SME 400 2015 Closed B2Holding n/a

Source: IMF, Central Bank of Albania, Central Bank of BiH, NPL Vienna Initiative, PwC Analysis

PwC32

Most straight-forward and widely used legal instrument for a local sale of NPLs is the assignment (cession) agreement to the resident company which, is regulated by the general provisions of Civil Code of the Russian Federation.

In case of the assignment agreement the debtor’s consent is not required, unless otherwise stipulated in the contract or legal provisions; Generally, notarization is not required (except when pledge or loan agreement being assigned was notarized).

Current Russian civil legislation does not prohibit the assignment of loans which are the subject of litigation.

Assignment of receivables, under a loan agreement from a bank to a non-credit organization, is allowed under the current legislation.

Income received on the assignment of claims is subject to VAT.

Russia2016 NPL%: 9.4% (∆yoy +1.1pp), vol. EUR 79.7b (∆yoy + 18.2b)


Notification in writing of the National Bank is required in the case of an assignment of loans denominated in a foreign currency or if an assignment of receivables (regardless of its currency) under an agreement is involving a foreign entity.

The disclosure of the assignment to the obligor is compulsory. The consent of the obligor is mandatory if the respective provision is stipulated by the loan agreement (unless, loan is transferred under a factoring agreement).

It is not directly regulated by law whether a servicer of NPLs needs to be a licensed bank or needs any other license

In pending enforcement of security or court procedures, the purchaser should be able to step-in to the position of the originator (subject to potential extra steps).

NPL transfers are generally not subject to VAT or stamp duty.

Ukraine2016 NPL: 30.5% (∆yoy +2.4pp), vol. EUR 14.4b (∆yoy +0.2b)

As at end 2016, total NPL volume held by country’s banks amounted to ca. EUR 14b, with 81

banks in bankruptcy as of end 2016

Very narrow market of NPL transactions, due to a non-transparent legal environment

Limited servicing capabilities available


As at end 2016, total NPL volume held by country’s banks amounted to ca. EUR 80b. Observed

strong increase in the volume reflects among other RUB FX evolution

Limited, but growing transactions observed on the market, however growing interest observed

Strong government support provides a secure safety net for the system important banks . However,

international sanctions and reserve capital requirements make it attractive for banks to

dispose


n/a Erste NPL - Mixed 500 n/a Closed n/a n/a


n/a OTP Bank Retail 75 2017 Expected n/a n/a

n/a Sberbank Retail 200 2017 Expected n/a n/a

Taurus Russia UniCredit NPL - Retail 125 2017 Ongoing n/a n/a

n/a Bank Otkritie NPL - Retail 500 2017 Ongoing n/a n/a

Marble Snoras Corporate, Residential 140 2016 Signed n/a n/a


PwC33

Annex

PwC34

Selected transactions 2015 – 2017 (1/2)



n/a Poland n/a PL - Retail Mortgage >2000 2018 Expected n/a Financial advisor

n/a Poland n/a NPL - Retail >250 2018 Expected n/a n/a

n/a Croatia Intesa NPL - CRE 200 2017 Expected n/a n/a

Pineta Serbia NLB NPL- Corporate, SME tbc 2017 Expected n/a Sell-side advisor

n/a Hungary MKB Bank NPL - Retail 200 2017 Expected n/a n/a

n/a Russia OTP Bank Retail 75 2017 Expected n/a n/a

n/a Russia Sberbank Retail 200 2017 Expected n/a n/a

Solaris Croatia HETA Platform & NPL portfolio 700 2017 Expected n/a Sell-side advisor

n/a SEE Sberbank NPL / REOs n/a 2017 Expected n/a n/a

n/a Poland n/a NPL - Retail >250 2017 Expected n/a n/a

n/a Germany Various DCAs NPL - Retail Up to 100 2017 Ongoing n/a Buy-side

Mars Romania Alpha Bank NPL - n/a 400 2017 Ongoing n/a Sell-side advisor

n/a Serbia Sberbank NPL - Corporate 45 2017 Ongoing n/a n/a

Taurus 2 Croatia Croatia UniCredit NPL - Mixed 260 2017 Ongoing n/a n/a

Taurus Russia Russia UniCredit NPL - Retail 125 2017 Ongoing n/a n/a

Amber Slovenia Abanka NPL - Corporate 246 2017 Ongoing n/a Sell-side advisor

Fain Romania Raiffeisen NPL - Mixed 260 2017 Ongoing n/a Sell-side advisor

Rosie Hungary Raiffeisen NPL - Retail 300 2017 Ongoing n/a n/a

Bolero B&H HETA NPL - n/a 440 2017 Ongoing n/a n/a

n/a Russia Bank Otkritie NPL - Retail 500 2017 Ongoing n/a n/a

n/a Croatia Raiffeisen NPL - Corporate 45 2017 Ongoing n/a n/a

n/a Croatia Raiffeisen NPL - Single ticket 85 2017 Ongoing n/a n/a

n/a Albania Piraeus NPL - n/a 50 2017 Ongoing n/a n/a

n/a Albania Intesa NPL - n/a n/a 2017 Ongoing n/a n/a

Taurus 2 Hungary Hungary UniCredit NPL - Retail 50 2017 Ongoing n/a n/a

Neptun Germany HSH Nordbank Corporate, RE, shipping 10.000 2017 Ongoing n/a Buy-side

Collection Germany Burda Group NPL - Retail 50 2017 Ongoing n/a Buy-side

Sky Germany n/a NPL - Retail 50 2017 Ongoing n/a Buy-side

n/a Belgium AXA Bank Europe NV Branch 633 2017 Ongoing OTP Bank n/a

n/a Poland n/a PL - Retail Mortgage 100 2017 Ongoing n/a Lead sell-side

n/a Poland n/a NPL - Retail >200 2017 Ongoing n/a n/a

n/a Poland Idea Leasing PL - Leasing

(securitisation)

350 2017 Ongoing n/a n/a

Atlantis Croatia HETA Single ticket 30 2016 Ongoing n/a Sell-side advisor

Pohorje Slovenia DUTB NPL - CRE 10 2016 Ongoing n/a Sell-side advisor

Metro Bulgaria Eurobank NPL - Corporate 65 2017 Late stage n/a n/a

Taurus 2 Bulgaria Bulgaria UniCredit NPL - Mixed 80 2017 Late stage n/a n/a

Castrum - Retail Romania Banca Transilvania NPL - Retail unsecured 110 2017 Late stage EOS n/a

Glan Austria/Germany HETA NPL - Leasing

unsecured

110 2016 Late stage n/a Sell-side advisor

Air Germany HSH Nordbank CRE 200 2017 Signed Cerberus n/a

n/a Croatia Raiffeisen NPL - Corporate 100 2017 SIgned DDM n/a

Onyx Serbia HETA NPL & Platform, Mixed 350 2016 Signed APS / Apollo / Balbec Sell-side advisor

Faust Croatia HETA Single ticket 100 2016 Signed Gasfin SA Sell-side advisor

Marble Russia Snoras Corporate, Residential 140 2016 Signed n/a n/a

n/a Ukraine Erste NPL - Mixed 500 n/a Closed n/a n/a

n/a Turkey Akbank NPL - n/a 180 2017 Closed Hayat / Final / Efes n/a

n/a Turkey Yapı Kredi NPL - Retail & Corporate 140 2017 Closed Güven n/a

n/a Turkey Yapı Kredi NPL - n/a 139 2017 Closed Güven / Hayat /Sümer n/a

Deep Sea Germany Nord LB Shipping 1.500 2017 Closed KKR Buy-side

n/a Belgium Van Lanschot NPL, PL 220 2017 Closed CKV n/a

n/a Belgium ABN Amro Bank NV Ptf pensiun fund n/a 2017 Closed Record Bank n/a

n/a Poland Getin Noble Bank PL - Auto-loans

(securitisation)

166 2017 Closed n/a n/a

Stack Netherlands ABN AMRO CRE NPL 220 2017 Closed Attestor Capital Buy side M&A

Blue Lake Romania Erste NPL - Retail mortgage 410 2016 Closed B2Holding / EOS Sell-side advisor

n/a Romania Piraeus NPL - Mixed 200 2016 Closed Kruk n/a

n/a Bulgaria BNP Paribas NPL - Retail 46 2016 Closed Kredit Inkaso n/a

n/a Romania CEC Bank NPL - Mixed 70 2016 Closed Kruk n/a

Iris Romania Societe Generali NPL - Corporate

secured

280 2016 Closed Kruk n/a

ROSE Romania Top Factoring Platform & NPL portfolio n/a 2016 Closed Intrum Justitia Sell-side advisor

n/a Romania Bancpost (Eurobank) Consumer 597 2016 Closed Kruk / IFC n/a

Taurus Hungary Hungary UniCredit NPL - Retail 130 2016 Closed APS Sell-side advisor

Pathfinder Croatia HETA CRE 400 2016 Closed Deutsche Bank / EOS Buy-side advisor

Ulysses Hungary Erste NPL - Retail mortgage 350 2016 Closed Intrum Justitia Buy-side support

Sunrise Croatia HPB NPL - Mixed, CRE 320 2016 Closed APS / B2Holding n/a

Taurus Bulgaria Bulgaria UniCredit NPL - Corporate, CRE 100 2016 Closed B2Holding Sell-side advisor

Taurus Croatia Croatia UniCredit NPL - Mixed 770 2016 Closed APS / Attestor Sell-side advisor

Rita Hungary Raiffeisen NPL - Corporate, mixed 300 2016 Closed n/a n/a

Taurus Slovenia Slovenia UniCredit NPL - Mixed 140 2016 Closed B2Holding Sell-side advisor

Saphire Croatia HETA Single ticket 135 2016 Closed KNG Sell-side advisor

Apollo Croatia HETA Single ticket 25 2016 Closed B2Holding Sell-side advisor

n/a Hungary Axa Residential n/a 2016 Closed OTP n/a

PwC35

Selected transactions 2015 – 2017 (2/2)



n/a Serbia Intesa NPL - Corporate 150 2016 Closed Apartners n/a

Victor Serbia Piraeus NPL - Mixed 45 2016 Closed B2Holding Sell-side advisor

Skipper Croatia HETA NPL - CRE 160 2016 Closed Supernova n/a

n/a Serbia Raiffeisen NPL - Single ticket 50 2016 Closed n/a n/a

n/a Bulgaria Eurobank NPL - Retail unsecured 143 2016 Closed EOS n/a

n/a Bulgaria National Bank of

Greece

Consumer 70 2016 Closed n/a n/a

n/a Romania Banca Romaneasca /

National Bank of

NPL - n/a 75 2016 Closed n/a n/a

n/a Turkey Finansbank NPL - Retail 218 2016 Closed Güven / Atlas / Destek n/a

n/a Turkey Akbank NPL - n/a 122 2016 Closed Güven n/a

n/a Belgium Optima NPL, PL 120 2016 Closed Delta Lloyd n/a

n/a Belgium Krefima NPL, PL 47 2016 Closed bpost Buy-side advisor

n/a Poland Santander PL - Retail

(securitisation)

290 2016 Closed n/a n/a

Swan Netherlands Propertize CRE PL/NPL 5.500 2016 Closed Lone star, JPM,

Goldman Sachs

Buy side M&A

Hieronymus Netherlands FMS Wertmanagement CRE PL/NPL 580 2016 Closed Goldman Sachs Buy side M&A

n/a Belgium Optima / Arcole NPL - Mortgages 28 2016 Closed CKV n/a

Orange Netherlands Rabobank CRE NPL 350 2016 Aborted n.a Buy side DD

Alpha Slovenia Raiffeisen NPL - Corporate, CRE 55 2015 Closed B2Holding Sell-side advisor

Drava B&H HETA NPL - Coprorate, SME 400 2015 Closed B2Holding n/a

Grey Serbia Erste NPL - Corporate 21 2015 Closed APS n/a

Istrabenz Slovenia Bawag NPL - Corporate, CRE 47 2015 Closed York n/a

Ivica Croatia Erste NPL - Corporate, CRE 200 2015 Closed n/a Sell-side advisor

Janica Croatia Erste NPL - Corporate, CRE 217 2015 Closed B2Holding Sell-side advisor

Pine Slovenia NLB NPL - Mixed 500 2015 Closed Apartners / Pineriver /

DDM

Sell-side advisor

Henri Romania Piraeus NPL - Retail 200 2015 Closed Kruk n/a

n/a Slovenia DUTB NPL - Corporate, CRE 670 2015 Closed BAML n/a

n/a Serbia Intesa NPL - CRE 35 2015 Closed n/a n/a

n/a Bulgaria TBI Credit NPL - Retail 50 2015 Closed APS n/a

Rosemary Romania Intesa CRE, CRE 287 2015 Closed APS / AnaCap n/a

Tokyo Romania Erste NPL - Corporate, CRE 1.200 2015 Closed Deutsche Bank / APS n/a

Triton Romania UniCredit NPL - Corporate, CRE 350 2015 Closed Kredyt Inkaso n/a

n/a Romania MKB Platform, Mixed 85 2015 Closed APS n/a

Ursa Romania Eurogroup EFG NPL - Retail 600 2015 Closed Kruk n/a

Helena Hungary Intesa NPL - CRE 237 2015 Closed CarVal n/a

Velence Hungary n/a NPL - Mixed 300 2015 Closed Carval / DDM n/a

n/a Hungary Citibank PL - Retail n/a 2015 Closed Erste n/a

PwC36

Definitions

Term Definition

Net NPL to Regulatory capital

Net NPL divided by regulatory capital.

NPL according to IMF

A loan is non-performing when payments of interest and principal are past due by 90 days or more, or at least 90 days of interest payments have been capitalised, refinanced or delayed by agreement, or payments are less than 90 days overdue, but there are other good reasons to doubt that payments will be made in full.After a loan is classified as non-performing, it (and/or any replacement loans) should remain classified as such until written off or payments of interest and/or principal are received on this or subsequent loans that replace the original.

NPL coverage ratioRisk provisions for loans and advances to customers as a percentage of non-performing loans and advances to customers.

NPL ratio Non-performing loans divided by total gross loan.

PwC37

Abbreviations

Abbrev. Description Abbrev. Description

AMC

Asset Management

Company LT Lithuania

AQR Asset Quality Rev iew LV Latv ia

AT Austria LU Luxembourg

BaFin

Bundesanstalt für

Finanzdienstleistungsaufsic

ht m Million

BE Belgium MD Moldav ia

BG Bulgaria M&A Merger & Acquisition

BiH Bosnia and Herzegov ina MT Malta

b Billion n/a not announced

BY Belarus NL The Netherlands

CE

Central Europe: CZ, HU,

LV, LT, PL, SI, SK NPL Non-performing loan

CEE

Central and Eastern

Europe: for the purpose of

this report: CE, EE, SEE,

CIS

NPL &

platform

NPL Portfolio + Serv icing

Platform

CIS

Commonwealth of

Independent States: KZ, RU,

UA NPL REO NPL Repossessed Object

CIT Corporate Income Tax PL

Poland or performing loans

respectiv ely

CRE Commercial Real Estate pp Percentage points

CZ Czech Republic PwC

PwC Network, of

independent legal entities

DE Germany Q Quarter

EE Estonia qoq Quarter-on-quarter

eoy End of y ear RBI

Raiffeisen Bank

International

ES Spain RE or R/E Real Estate

EUR Euro RKS Republic of Kosov o

F Forecast RO Romania

FI Finnland RS Serbia

FYRM

Former Yugoslav Republic

of Macedonia RU Russia

GBV Gross Book Value RWA Risk-weighted assets

GDP Gross Domestic Product SEE

South Eastern Europe: BG,

HR, RO, RS, TR

GR Greece SI Slov enia

CY Cy prus SK Slov akia

HETA HETA Asset Resolution AG SME

Small & medium

enterprise

HR Croatia TR Turkey

HU Hungary TRY Turkish Lira

IE Ireland UA Ukraine

IMF

International Monetary

Fund VAT Value added tax

IT Italy yoy Year-on-y ear

KZ Kazakhstan

PwC

Deleveraging for growth38www.pwc.com

European Portfolio Advisory Group

Our specialists are fully conversant with the non-core deals marketProfound technical know-how, as well as regional understanding coupled with strong transactional experience enable us to accompany our clients, advising and providing them with active support acrosss the full value chain of distressed assets value extraction.

Your PwC contacts

Bernhard EngelPartner, FS Deals LeaderPwC [email protected]

Volker SkowaschPartner, FS Deals LeaderPwC [email protected]

Michael De RooverPartner, BRS LeaderPwC [email protected]

Wilbert van den HeuvelPartner, FS Deals LeaderPwC [email protected]

This publication has been prepared for general guidance on matters of interest only and does not constitute professional advice. You should not act upon the information contained in this publication without obtaining specific professional advice. No representation or warranty (express or implied) is given as to the accuracy or completeness of the information contained in this publication, and, to the extent permitted by law, PricewaterhouseCoopers, its members, employees and agents do not accept or assume any liability, responsibility or duty of care for any consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it.

© 2017 PwC Advisory Services GmbH. All rights reserved. In this document, “PwC” refers to PwC Advisory Services GmbH, a member firm of PricewaterhouseCoopers International Limited, each member firm of which is a separate legal entity.

Editorial: Ana Kostic, Benjamin Doplbauer, Bernhard Pfann, Bogdan Popa, Christoph Keidel, Darija Hikec, Gasper Gostincar, Georg Zimmer, Ildikó Kürthy, Jozefina Buc, Kadir Kose, Madalina Corpodean, Marko Fabris, Michel Chehin, Michał Lewczuk, Mirza Bihorac, Rossitza Stoykova, Rolf Jan Keijer, Philip Ide

Serkan TarmurPartner, FS Deals LeaderPwC [email protected]

Petr SmutnyPartner, BRS LeaderPwC [email protected]

Edward MacnamaraPartner, Advisory LeaderPwC [email protected]

Paweł DżurakBRS & Portfolio Advisory LeaderPwC Ukraine & [email protected]

redefining the non-core - pwc · lending and npl coverage subdued lending growth although the...

Documents